The recession in the "Housing and
Construction" certainly the mother of industry which is lying
idle without any business activity for the last 3-4 years has
adversely affected the commercial viability of more than 40 allied
industries in Pakistan.

When the construction and housing sector was
blooming in Karachi, the allied industries including ceramics, cement,
paints, electrical goods, floorings, carpets, tiles and marbles, stone
crushing etc had created tremendous business opportunities from
Karachi to Skardu. Now this important sector has come to a complete
halt in Karachi due to various reasons. Consequently, cement sector is
running half of the capacity; re-rolling sector has come to the stand
still.

Syed Jamshed Ali Rizvi, Chairman Association of
Builders and Developers, and Engineer Zaheer Qadri, Chairman Southern
Region ABAD while commenting over the above situation, have expressed
the hope that the newly framed National Housing Policy would come to
take the housing industry out of the lethargic conditions.

They said beside the general economic recession,
some of the government policies such as housing survey,
ever-increasing taxes and duties altogether have brought a serious
impact on this growing industry. No doubt a large portion of informal
economy was active in investment in this sector but this informal or
black economy was greatly helpful in creating job opportunities for
the poor at a massive scale. Hence this sector deserve a soft
treatment in the larger interest of the poor. The ABAD leaders felt
that exemption of 150 sq. yard plots and 1000 sq. feet covered area of
flats have been exempted from all sorts of taxation is really a step
towards regeneration of business activity in this sector. Generally
speaking, the new housing policy announced by the government is
supposed to revive this sector, however the aspect of implementation
of the policy in letter and spirit is the pre-requisite for achieving
the desired results. Jamshed citing the example of the cement sector
where the government had announced some relaxation in terms of
taxation but practically speaking after announcement of the relaxation
in the budget, actually the prices have gone up by Rs550 per truck
which carries 200 bags or 10 ton of the cement. This is a good example
of contradiction between the policy and its implementation.

Zaheer Qadri pointed out that availability of
infrastructure prior to start of construction of a new housing scheme
should be made mandatory for the development agencies to attract
investment in the housing sector. He cited the examples of various
localities where KDA has allowed for construction of housing units
without availability of infrastructure facilities like water,
sewerage, electricity, gas or telephones. The best example is the
localities like Gulistan-e-Jauhar, Scheme 33 or Hawks-bay schemes in
Karachi. The development charges have already been received from the
allottees yet the development work has not yet been completed in these
areas. The lack of infrastructure facilities is one of the major
hurdles in the promotional activities in the housing sector, he said.

Jamshed and Zaheer observed that it has been agreed
in the newly announced housing policy that the construction work on
262 housing projects held up for quite sometime on account of
violation of building rules be resolved shortly. These held up
buildings will be regularized to allow them completion. However
despite the decision, no SRO has been issued in this regard so far,
consequently the policy has not brought any visible move in the
industry so far. They urged the government to ensure that the policies
announced are also implemented in its true spirit to get the positive
results. The corrupt government machinery should not be allowed to mar
the good decisions for personal gains.

Welcoming the new housing policy ABAD leaders said
that the present government's intention to address genuine issues
faced by the people is really reflected in this policy. Since any
government in the past never took the housing sector seriously,
consequently the housing problems continued to pile up with the
passage of time. The new policy, they said is aimed at resolving the
housing problems at a massive scale in this country. With the
generation of business activity in this sector, business will start in
more than 75 allied industries, which would naturally address the
problem of unemployment in this country, they observed.

They also appreciated the efforts of the government
to expand the financing facilities to the level of the commercial
banks, which is also expected to produce some positive results in this
sector. The banking sector in general should be allowed to provide
house financing at an affordable rate to resolve the fundamental need
of the shelter-less.

Situation

Housing is the basic and fundamental human need,
yet millions are caught in the struggle to have a roof over their
head. Appreciating the gravity of the situation and realizing the
potential of housing and construction as a productive sector of
economy, the government directed the Ministry of Housing and Works to
formulate the National Housing Policy which was presented to the
President and Chief Executive of Pakistan on June 22, 2001.

Housing and construction are well recognized to
generate maximum employment opportunities and have contributed to
economic revival and growth. Its multiple effects on the economy have
to robust potential to generate industrial activities, develop small
and medium enterprises (SMEs) self-employment opportunities, business,
commerce and trade activities and at the same time encouraging
utilization of indigenous natural and man-made resources. It will
create social cohesion and environmental improvements. More
significantly, the private and informal sectors play a vital role in
housing construction. It is high time to alleviate the economic
situation in the country, housing and construction sector is harnessed
to its fullest potential.

Problems

According to the 1998 census, the total number of
housing units, throughout the country, was 19.3 million, 67.7 per cent
housing was in rural areas and 32.3 per cent in urban areas. The
overall housing stock comprised 39 per cent kucha houses, 40 per cent
semi-pukka houses and 21 per cent pukka houses. The housing backlog,
as estimated according to the 1998 census, was 4.3 million units. The
annual additional requirement is estimated around 500,000 housing
units whereas the annual production is estimated around 300,000
housing units resulting in a recurring backlog of 270,000 housing
units annually. The household size is 6.6 persons and the occupancy
per room is 3.3 persons.

It is estimated that to make up the backlog and to
meet the shortfall in the next 20 years, the overall housing
production has to be raised to 500,000 housing units annually.

The present government, as a priority industry in
category "C" has recently notified housing and construction.
The usual privileges, concessions, exemptions and remissions have
become applicable to this industry in accordance with the Board of
Investment policy.

One of the objectives of the housing policy is to
facilitate provision of housing inputs including land, finance,
building materials, institutional and legal framework. The policy will
also emphasizes to analyze the culture of poverty and the forces
generating ever increasing slums and katchi abadis including
political, public, social, economic, bureaucratic and environmental
forces.

It aims to promote ways and means for housing
development by enhancing affordability, saving capacity, human
tendencies and potential. It desires to provide safeguards against
malpractice, bureaucratic inefficiencies, institutional weaknesses and
Mafia assaults.

The policy aims to develop indigenous and cost
effective approaches particularly for the low-income groups in the
country.

HBFC laws are being amended to facilitate Islamic
mode of financing for the house-financing sector.

Land

Under the national housing policy, the provincial
and local governments shall identify state and other lands in and
around urban and rural settlements for housing developments for
immediate action. Land availability shall be enlarged through various
innovative measures like land banking on continuous basis to cater to
at least 5 to 10 years development plan needs. Land acquisition Laws
shall be made simple to make provision for unified, transparent and
market value oriented system and litigation minimization. Federal and
provincial funding and assistance shall be available for
infrastructure, amenities and other developments only in the planned
areas. Land disposal systems shall be developed which are unified,
transparent and market oriented with open auction policy and exception
for special needs. Provision of trunk infrastructure shall be
responsibility of utility agencies like WAPDA, PTCL, SNGPL, SSGPL,
KESC etc. The cost of trunk infrastructure shall not be an additional
charge to the public or private housing development schemes within the
planned areas.

Finance

Financial institutions and Housing financial
institutions shall be encouraged to float long term bonds at market
rates to raise housing finance. Housing finance institution shall be
promoted to encourage savings and provide credit from community based
finance and other sources.

The annual disbursement of HBFC loans shall be
enhanced from the present Rs1.2 billion to Rs7 billion over the next 5
years.

HBFC and other financial institutions shall
formulate packages of preferential/ confessional mark-up rates with
affordable system of installments for repayment to provide affordable
credit to low income groups. HBFC shall reintroduce bridge financing
and bulk financing of housing projects.

Financial institutions shall be encouraged to give
mortgage loans for housing purposes at market rates. All commercial
banks shall be encouraged to advance loans for housing and housing
projects by earmarking a substantial percentage of their loan
portfolio like other industrial and commercial projects. Housing
refinance window shall be set up at State Bank of Pakistan for long
term funds from multilateral agencies. Institutions maintaining
insurance funds, provident funds, EOBI funds etc shall be encouraged
to invest a part of their portfolio in the housing and construction
sector including long term loaning bonds.

Part of the sale proceeds of valuable public land
shall be set aside to provide plots for low income housing and housing
for the poor and needy at concessionaire rates.

Incentives

All new construction of houses on plots measuring
upto 15- sq.yards and one apartment having an area of 1000 sq.ft.
shall be exempted from all types of taxes for a period of 5 years.
Land for housing schemes shall be provided to development agencies and
private sector builders and developers on concessionaire rates subject
to the condition that proportionate subsidy is passed on to the target
group.

Under the new housing policy, stamp duties and
registration fees, which are exceptionally high as compared to other
countries, shall be adequately reduced to an aggregate total of 1 per
cent to enhance registration, improve documentation and increase
revenue receipts. Collection of levies like EOBI, education cess,
social security, professional tax etc shall be made one window
operation. Banks and DFIs shall extend credit facilities for
balancing, modernization and replacement (BMR) of machinery used for
housing and construction industry. Import of plant and machinery and
spares by the housing construction companies, not manufactured
locally, shall be exempt from custom and import duties in excess of 10
per cent. This will be in accordance with government notification
declaring housing and construction as priority "C" category
industry. Guarantees issued by "A" rated insurance companies
approved by the Securities & Exchange Commission in respect of
earnest money, retention money, performance, maintenance and
mobilization advance shall be accepted by various government agencies,
departments etc for implementing housing projects.

The duties and taxes on major construction
materials shall be rationalized and reduced to make construction more
affordable. As a first step excise duty, sales tax and other levies on
cement and steel shall be reduced substantially.

Slums

The policy says that the provincial governments
shall develop packages in which prime state land within urban centres
occupied by the katchi abadies shall be offered to the private
developers for commercial use provided they arrange and finance
up-gradation or relocation of katchi abadis.

Rural

To promote rural housing, the provincial
governments shall estimate the possibility of granting proprietary
rights to individuals and families residing in houses constructed on
shamlaat deh DD and state land. Banks and DFIs shall extend credit
facilities for balancing, modernization and replacement (BMR) of
machinery used for housing and construction industry.

Housing loaning agencies and companies shall
provide standard and cost effective designs and plans to the
prospective home builders.

Plan

The National Housing Policy lays importance on
development of comprehensive land information system including
inventory and land classification, mapping, settlement patterns, land
values, land availability etc as a mandatory requirement.

The development of master plans/ structural
plans/outlines development plans shall be mandatory requirement for
all urban and rural areas. The concept of integrated development
optimizing land use shall be promoted. Development of metropolitan and
major urban centres shall be encouraged under the new policy.

Meanwhile, laws facilitating Islamic mode of
financing through the HBFC have been finalized and being examined by
the law ministry for final approval.

The announcement regarding Islamic mode of
financing in the housing sector through financial institutions and the
HBFC would be made soon. Once the laws are in place, the HBFC would
commence its operations, which were seized for over a year.

Housing policy envisages active involvement of
banks and financial institutions. To protect the interest of the
financial institutions in the housing sector, broad-based foreclosure
laws have been made. These laws would be presented before the Cabinet
for approval and would be announced sometimes next month. This would
greatly enhance investment in the housing and construction sector.

The housing policy has taken care of the interest
of both the private sector and the individual and it was now up to
them to take advantage of this policy and meet the shortfall in the
housing sector.

There is a backlog of 4.3 million housing units and
to meet this shortfall in the next 20 years, the housing policy
envisages production of 500,000 units annually. The policy has assured
to enlarge availability of land through various innovative measures
such as land banking on continuous basis to cater to at least five to
ten year development plan needs.

For this purpose land acquisition laws would be
suitably amended to make provision for unified, transparent and market
value oriented system and litigation minimization.

The emphasis of the policy is to provide affordable
housing units to the rural poor and the urban low and middle-income
groups. For the purpose the provincial and local governments shall
identify state and other lands in and around urban and rural
settlements for housing developments for immediate action.

The policy indicates that the government was
conscious of rapid increase in the prices and would adopt measures in
the implementation of the policy that prices would substantially come
down. Similarly, prices of steel should come down as duty on the ship
breaking and allied industries had been reduced.

There was a time when foreign investors had started
looking into housing and construction industry for massive scale.
Arrival of Korean giants Daewoo and other companies in this respect
are the glaring example of attractiveness of this sector. However
rampant corruption in the house related government departments and
some of the bad laws scared not only the foreign investors but also
even the local investors shifted their interest from housing sector to
other safe but lucrative areas? Such as investment in dollars and
other foreign currencies where no documentation is required they can
sell and purchase at the time of their choice. If we have to roll
again the wheel of industry, it is imperative to create investment
climate in the housing and construction related agencies to attract
the local investors in this important sector, which can be rightly
described as the mother industries.